I’ve moved money from a Cash ISA into a stocks and shares ISA before. I’ve never done the reverse, but I assumed I could if I wanted to take some risk off the table. From next April, that choice disappears until the tax year you turn 65.
The government wants more of us to invest, on the basis that it should bring better long-term returns. I think cutting the cash allowance to make that happen is a daft idea.
If someone is uncomfortable investing, a smaller tax-free cash allowance will not magically make them comfortable. They may use an ordinary savings account. They may save less, or spend the money instead. We can’t know how many people will do that, but I think it’s a real risk. Saving towards retirement in cash may mean accepting lower growth. It is still better than arriving at retirement with nothing saved. If this change leaves more people in that position, the cost will show up later for them and potentially for the state.
The allowance change is simple enough
The overall ISA allowance stays at £20,000. What changes on 6 April 2027 is how much of it most people can put into Cash ISAs:
| Annual allowance | Until 5 April 2027 | From 6 April 2027 |
|---|---|---|
| All adult ISAs combined | £20,000 | £20,000 |
| Cash ISAs | Up to £20,000 | £12,000* |
The £12,000 cash limit applies until the tax year in which you turn 65. From the start of that tax year, you can put up to the full £20,000 annual allowance into Cash ISAs.
This is a limit on new money paid in each tax year. It does not mean that someone with £40,000 already in Cash ISAs has to take £28,000 out. If you normally save less than £12,000 a year into Cash ISAs, this part may make no difference to you.
The government expects people affected by the cap to put more into stocks and shares ISAs. Some will, and for money they won’t need for years, that may work well. But the alternative to a Cash ISA is not automatically an investment ISA. Money for an emergency, a house move or the first years of retirement has a different job from money you can leave invested through a bad market.
The transfer rule is the part I’d watch
Today, you can transfer between a Cash ISA and a stocks and shares ISA in either direction, provided the receiving provider arranges it.
From 6 April 2027, you cannot transfer from a stocks and shares ISA back to a Cash ISA until the tax year in which you turn 65. Cash to stocks and shares still works. This applies to money paid in years ago, too. The new transfer rules also cover innovative finance ISAs.
I find this more troubling than the £12,000 limit. Imagine you are 62 and have built up a stocks and shares ISA alongside your pension. You expect to start drawing on that ISA soon. You might reasonably want to sell some investments and move the proceeds to a Cash ISA, so a market fall doesn’t decide how much you can spend in the first few years. Under the new rules, you cannot make that ISA transfer yet.
This doesn’t mean you have to stay in shares. You can sell investments and keep cash inside the stocks and shares ISA, though from April 2027 the interest on that cash will face a 22% charge. That is a charge on the interest, not on your savings balance. You could also withdraw the money to an ordinary savings account, but then it leaves the ISA; whether the interest is taxable depends on your circumstances. Both options are workable. Neither is as straightforward as moving into a Cash ISA.
I can see why the government has done it. Without a transfer restriction, someone could pay £20,000 into a stocks and shares ISA and then shift it into cash, sidestepping the new cap. But that fix also catches people who invested for years and now want less market risk as they approach retirement. The government recognises that people may want to reduce risk as they get older. Setting the exception at 65 leaves an awkward gap for those who need the money earlier.
What I’d do with this information
I wouldn’t move money solely because a rule changes next April. I would check whether my plan depends on being able to move from an investment ISA to a Cash ISA, particularly if the money has a spending date before 65. Providers will need to explain how they will handle transfers and cash held inside investment ISAs; that detail is worth checking when it becomes available.
More broadly, I wouldn’t let an ISA rule make the decision about whether to save or invest. Tax relief is useful, but it cannot make an unsuitable investment timescale safe. And if the choice is between saving in cash and not saving at all, I would rather see the money saved.